Oillllllll

Discussion in 'Stock Market Forum' started by hawksfan9325, Jan 9, 2016.

  1. kgord

    kgord Senior Investor

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    I think I am going to wait until oil hits rock bottom and then invest. There is no doubt that the prices are going to continue to tank, at least for a while...so I don't think there is any point in getting in right now. I used to have an investment in Connoco Phillips, that did rather well for awhile.
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

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    For you newbs, keep in mind that no one knows if oil will ever be $80 again, or $100, or eventually even $150 again someday for certain. People who make these types of predictions are usually talking completely out of their asses (speculating in order to try to sound smart), and are often wrong.

    When was the last time you heard Buffett make a prediction about where the market will or won't ever be, or where this or that stock or commodity will or won't be during this or that time? If Buffett doesn't know, I can assure you that no one on a message board knows.

    Predictions are a fool's errand.

    If you want to hear what actual experts are saying:

    http://www.cnbc.com/2016/01/12/saudis-failing-to-drown-us-with-oil-harold-hamm.html

    http://video.cnbc.com/gallery/?video=3000412643

    But even they are speculating - it's just that they're smarter than message board hacks, and actually work in the industry. Hamm is worth 11 figures.
     
  3. turt

    turt Guest

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    Oil companies deal in more than just drilling oil so they won't be hurt as bad as a more direct investment in oil. Will oil go back up? Yes - But when, I have no idea. If the prices keep falling, the middle east will probably end up destabilized which could send oil through the roof if something breaks out. Also, with less money to invest in new fields, the production will slowly whither away.
     
  4. anders

    anders Well-Known Member

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    Oil will go back up, it's just whether it happens in your lifetime or not.

    And I'm not being facetious here; if you're looking to liquidate your portfolio in the short term for whatever reason - retirement being one such reason - then having a big exposure to oil might not be so wise. I honestly thought oil would have rallied by now, to some degree at least, but it hasn't. What looked like being a temporary blip is now looking more like a long-term pattern.....
     
  5. petesede

    petesede Guest

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    What I mean is that as prices fall, they are much more likely to produce more, not less. None of these major producers right now can afford to cut production, they all have to increase production as the price falls. it is hard to say where the Saudis need oil to be to balance their budget.. but the important thing to remember that it is NOT a price per barrel, it is an overall budget amount, which they can acheive by producing more, cheap oil.
     
  6. ajaskey

    ajaskey Member

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    Hi. New here. I've been looking at energy and believe there is a big bounce coming. Not sure when but energy tends to run a different cycle than the stock markets. As for oil, price action is not unexpected over the past 30-40 years. Ignoring the price blow-off in 2007-2008, the "normal" price should be between $20-60. Here is a long term cycle chart. Note how price is moving down at the same slope as it went up.
    crude-cycle-2007.jpg
     
  7. petesede

    petesede Guest

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    There are too many huge political and macro economic issues to even think about using tech analysis on a 40 year chart for oil. Forty years ago, china was a third world country exporting mainly plastic toys. Now they are a huge economy that can single-handedly effect oil prices with any hint of economic slowdown.

    All that said, 20-60 sounds about right for the next few years LOL
     
  8. crimsonghost747

    crimsonghost747 Senior Investor

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    The average cost of producing a barrel in the Saudis is somewhere around $10 if I recall correctly. Say they produce 10 barrels when the price was $100. That's $90 profit per barrel, earning them $900. Now oil is at $30. So that is $20 per barrel profit. So to get $900 they would need to sell 45 barrels of oil.

    I don't think that a 4.5x increase in production is feasible, I certainly don't think that oil will stay anywhere near the current levels if the Saudis magically increase production 4.5x overnight. In fact I don't even think they could find buyers for that much oil, no matter how low the price. And as you said, the more they produce the lower the price goes and the more they need to produce.

    I simply do not see how increased production could solve their budget deficit.
     
  9. petesede

    petesede Guest

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    it won´t be able to. Also, I think it is not really accurate to say their production cost is $10 since oil is almost the sole source of income to fund their entire gov´t. Our oil companies are independent and have no expenses outside the actual company. Saudi oil is integrated with their entire gov´t. At $10 per barrel, the saudi´s may be able to get oil from the ground, but their entire country will collapse around them. For our companies, the price to get the oil out of the ground is a more accurate description of profitability.
     
  10. crimsonghost747

    crimsonghost747 Senior Investor

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    It is an accurate production cost, as production costs is the cost of producing it, not the $$$ needed to fund the company or country. What you said is exactly what we are seeing now, they are still profiting about $20 per barrel but it simply isn't enough to cover their expenses. I have no idea what the "price to balance budget" would be for the Saudis... I might calculate it next week if I find the time.
     

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